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NO TRADEMARK INFRINGMENT FOR PARALLEL IMPORTS IN CHINA.................................................28

March 2016

Editorial

From the Editor

In China, an application or a patent might be rejected or invalidated for lacking essential features, which requirement is directed only to an independent claim. The key to determine whether the "essential features" requirement is met is the "technical problem to be solved". What if the description states that several technical problems are to be solved by the claimed invention, while the independent claim can solve only some of the technical problems? The Supreme People's Court of China addressed this question in its "carriage for motor vehicles" case, which is a guiding case of the Court made in 2015, and sided with the "subject technical problem approach".

Elsewhere, on the tradeamrk aspect, we looked at the development of protection of "merchandising rights or interests" in China, for which it seems that the right owners can now seek effective proteciton. We also scrutinized the application of customs actions to stop infringing products through China's customs, which in may view is one of the most effective ways to curb infringement, especially trademark, design and copyright infringement.

Xiaojun Guo

2016 INTA Annual Meeting: CCPIT Reception and Meeting Invitation

A team of attorneys from CCPIT Patent and Trademark Law Office will be attending the 2016 INTA Annual Meeting in Orlando. We will have meetings with our clients and friends in a hospitality suite. The operation time and location of our hospitality suite are:

China has handled over 1.1 million patent applications for invention last year, up 18.7 percent year on year. About 359,000 patents for invention were granted, among which 263,000 patents were granted to domestic applicants, 100,000 more than in 2014, indicating an increase of 61.9%. The tables below show some of the statistics regarding patents/patent applications for invention.

2. PRB Handled More Cases and Shortened the Average Examination Pendency in 2015

In 2015, PRB has received about 16,000 patent reexamination cases and patent invalidation cases in total, among which 12,000 were patent reexamination cases and 3,724 were patent invalidation cases. The quantity of the patent invalidation cases maintained a stable increase since the "Twelfth Five Year Plan", up 9% year on year.

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Also in 2015, totally 29,000 patent reexamination and invalidation cases were concluded, up 27% year on year, with patent reexamination cases accounted for 25,000, up 26% and invalidation cases 3,652, up 33% year on year. What worth to be mentioned is that the quantity of patent reexamination cases concluded is larger than that of the received patent reexamination cases for the first time, and the pending patent reexamination cases had decreased significantly.

The average pendency for patent reexamination cases was dropped from 14.6 months in 2014 to 12.3 months by the end of 2015 and that of the patent invalidation cases was dropped from 7.2 months in 2014 to 5.4 months by the end of 2015.

In the year of 2016, PRB will make thorough research on the positioning of the patent reexamination and invalidation proceedings and further optimize and improve the patent reexamination and invalidation systems. Further, PRB will continue the efforts in cutting down the pendency of patent reexamination and invalidation cases by improving examination efficiency. Finally, PRB will collect typical cases regarding patent reexamination and invalidation so as to unify the examination criteria within the Board and with those of the State Intellectual Property Office of China.

3. WeChat Committed to Enhance IP Protection

The most popular social media app WeChat, developed by Chinese Internet giant Tencent, has issued a report recently, committing to enhance IP proteciton. Wechat has totally 650 million users, including more than 10 million public accounts.

The WeChat team received more than 22,000 complaints about public accounts in 2015, of which 13,000 concerned IP issues, and 12,000 complaints about individual accounts, of which about 200 concerned IP.

Trademark infringements accounted for the majority of complaints, of which about 90% were about unauthorized use. The company handled more than 17,000 complaints about counterfeit goods last year, 7,400 of which were confirmed by trademark owners. More than 7,000 WeChat accounts selling fake goods were shut down.

WeChat had launched a trademark protection mechanism since 2015, which involves about 40 trademark right owners covering more than 100 brands, including well-known international brands such as LV and Chanel.

In the copyright domain, 61% of the complaints about public accounts involved written works, while 67% of the complaints on individual accounts were about photography.

An originality declaration function allowing authors to set limitations on sharing was introduced on Jan 23, 2015, which automatically checks the originality of submitted content by comparing it with prior work. The mechanism has recorded more than 5 million authorized shares.

The WeChat's IP team will block or erase the infringing contents upon finding an infringment and the publisher will be given a warning or in more severe cases be imposed restrictions to access the account. In certain cases the WeChat account will be canceled completely.

4. China Launched IP Operations Funds

At the turning of the new year, Beijing Key Industry IP Operations Fund and Sichuan IP Operations Fund, were jointly funded by Chinese central and local governments for first time which were established separately with 1 billion yuan and 700 million yuan. Experts said that intellectual property operations fund is a new wave of emerging knowledge-based economy, which is like financial "wings" for intellectual property, will bring new development of intellectual property.

Beijing Key Industry IP Operations Fund with 1 billion yuan planned is the largest IP operations fund in domestic. According to an official from Beijing Intellectual Property Office, this fund was set up with limited partnership, with the duration of 10 years and planned size of 1 billion yuan. Currently, the first 400 million yuan has been subscribed, of which three fiscal system of central government, Beijing Municipal Government and Zhongguancun Park Administrative Committee invested 95 million yuan as guidance funds, which will guide 305 million yuan invested by key industrial enterprises, intellectual property services and investment institutions.

Sichuan Intellectual Property Operations Fund, with the total size of 700 million yuan, was set up in the form of "1 + 3 + N" mode, namely, 100 million yuan invested by Sichuan Province government, 70 million yuan was jointly invested by government of Chengdu, Deyang and Mianyang. Under this mode, the fund was also invested by other IP advanced companies and intellectual property services companies, banks and investment institutions in Sichuan province. Now initial 280 million yuan has been to the account..

Two funds will focus on the intellectual property of existing core

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technologies and patents of cutting-edge technology with industry prospects for nearly coming time. Among them, the first phase of investment by Beijing Key Industry IP Operations Fund will focus on mobile Internet and bio-pharmaceutical industries, mainly start-ups or growing enterprises which have core patents and patent portfolio of high value, good market prospects and high growth, or intellectual property operation institutions with the appropriate characteristics of industries; Sichuan IP operations Fund will invest in IP operation enterprises with strong IPR and cultivation and operations of high-value patent portfolio, major foreign IPR disputes and defensive acquisitions, international standards making involving patent, industrial patents navigation, industry intellectual property alliance construction, industrial core technology patent transformation and industrialization, etc.

5. The State Council Seeks Opinions on the Proposed Amendments to the Chinese Patent Law

On December 2, 2015, the State Council published the proposed amendments to the current Chinese Patent Law submitted by the State Intellectual Property Office of the P.R.C. and sought public opinions on those amendments by January 1, 2016.

As compared with the current Chinese Patent Law, the proposed amendments aim at reinforcing protection of the patent right against infringement by judicial and administrative approaches and providing an efficient patent system for patent owners or patent applicants. For example, the statutory damages for patent infringement are increased to RMB 5,000,000 yuan at the most according to the proposed amendments. The proposed amendments also add provisions against patent infringement through e-business.

6. ZTE Made a $21.5 Million Global Settlement with Vringo

Vringo announced on Dec. 11, 2015 that its Vringo Infrastructure subsidiary had reached a litigation settlement and licence agreement with Chinese Shenzhen-based telecom company ZTE, bringing the patent infringement disputes between the two companies in multiple jurisdictions to an end.

Under the terms of the settlement, ZTE has agreed to pay Vringo a lump sum of $21.5 million for a perpetual nonexclusive licence to the patents in dispute and an end to lawsuits between the two. As reported, those patents in

dispute were acquired from Nokia in 2012. All pending lawsuits between the two companies will be dismissed 10 days after Vringo has received the agreed payment.

ZTE has patent infringement and/or validity disputes with Vringo in multiple jurisdictions including Australia, Brazil, China, France, Germany, India, Malaysia, Netherlands, Romania, Spain, United Kingdom and the United States of America. It is noted that although Vringo is based in the U.S., it launched lawsuits against ZTE mainly in other jurisdictions such as in the Europe.

The payout of ZTE might be quite lower than the prediction of some professionals in the art. Some had expected Vringo to get over $100 million for the patent infringement disputes.

7. Chinese Character for SIMMONS Plus "SIMMONS" in English Being Generic for Trademark Registration

Since Trademark Review and Adjudication Board (TRAB) under the State Administration for Industry and Commerce (SAIC) maintained the rejection for lacking distinctiveness against American Dream Limited Company's trademark registration application for Chinese Chacter for "SIMMONS" plus "SIMMONS" in English on mattresses on beds and the like, Dream Company appealed the decision of TRAB to Beijing IP Court. Recently, the Beijing IP Court made its judgement and upheld the decision of TRAB.

Although Dream company claimed that the trademark came from the surname of the company founder and the company's well-known brand "SIMMONS", as well as the corresponding Chinese transliteration of "SIMMONS", and that the Chinese Character for "SIMMONS" does not appear in any national standards or industry standards, the IP Court determined the trademark is generic.

The IP Court held, the trademark is consisted of the Chinese Character for "SIMMONS" and the English word "SIMMONS", and the Chinese Character for "SIMMONS" is the main identifier of the whole trademark. When used on mattresses and other related goods, it could be easily understood as being directed to the mattresses by the relevant public, instead of as a source identifier. The trademark therefore cannot distinguish the origin of goods.

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ESSENTIAL FEATURES AND THE TECHNICAL PROBLEMS

Author: Xiaojun Guo, Weiwei Han

In an invalidation case involving the invention patent entitled "carriage for motor vehicles", the Supreme People's Court held that essential technical features recited in an independent claim have to be regarded all features which are necessary to solve the technical problem with which the application is concerned, and where the description explicitly indicates that the patent technical solution can solve a plurality of technical problems simultaneously, an independent claim must encompass all the technical features essential for the concurrent solution of the plurality of technical problems. The Supreme People's Court's Administrative Judgment No. Xingtizi 13/2014. Coincidentally, the Boards of Appeal of the European Patent Office (EPO) ruled in T2001/12 of 29 January 2015 that essential technical features defined in an independent claim are indispensable for solving the technical problem to be solved by the application.

The technical problem to be solved by the patent plays a key role in determination of essential technical features of a claim, which is not expressly stipulated in the Chinese Patent Law. How to determine "the technical problem" depends, in essence, on whether the tenets of the Chinese Patent Law are satisfied and what happens in reality.

The patentee, ELECON ASIA S.A., owned a patent for invention No.02803734.0, entitled "carriage for the horizontal transfer of motor vehicles in automatic mechanical car parks". Upon request by the petitioners, Liu Xiayang and Yeefung Company, for invalidation of the above-mentioned patent, the Patent Reexamination Board (PRB) made the Decision No. 14538, holding that claims 1 to 3, claims 5 and 6 according to any one of claims 1 to 3, and claims 7 to 15 of the patent in suit

lack essential technical features and do not comply with the provision of Rule 21.2 of the Implementing Regulations of the Patent Law (in correspondence to Rule 20.2 of the Implementing Regulations of the Patent Law of 2010), thereby declaring all those claims invalid.

As regards one of the focal issues in the present case, namely, determination of the technical problem to be solved by the patent in suit, the Invalidation Decision stated that the means having the above functions can solve the technical problems of increasing the speed of conveying motor vehicles and reducing the carriage costs, but claim 1 fails to recite, in detail, the structure of the means (58, 59) and how to achieve the above functions. Both the Beijing No.1 Intermediate People's Court and Beijing Higher People's Court ruled in their judgments that the PRB's finding that claim 1 lacks essential technical features was correct and therefore maintained the PRB's decision.

In the retrial filed by the patentee, the Supreme People's Court held that:

"According to the technical problems, background art and advantageous effects recited in the description of the patent in suit, the patent in suit intends to solve the technical problems in the following four aspects simultaneously, i.e., reliable conveyance, conveying speed, reduced space, and lower costs. In this case, independent claim 1 shall encompass essential technical features necessary for solving the technical problems in the four aspects at the same time." Accordingly, it was found that the Invalidation Decision and the secondinstance judgment erred in fact-finding and application of laws.

The Supreme People's Court made a thorough analysis of the

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technical problem determined when judging whether a claim lacks essential technical features and distinguished it with the "technical problem" determined when judging an inventive step:

"Rule 21.2 of the Implementing Regulations of the Patent Law aims to further standardize the corresponding relationship between the description and an independent claim (which has the broadest protection scope among the claims in the claim set) such that the technical solution defined in the independent claim conforms to the contents, in particular the background art, the technical problem and advantageous effects, as recited in the description. Thus, the `technical problem' mentioned in Rule 21.2 of the Implementing Regulations of the Patent Law refers to the one intended to be solved by the patent as recited in the patent description and as alleged by the patent applicant in the description according to its or his subjective cognition of the background art described in the description. The technical problem to be solved by the patent is presented from different perspectives in consideration of mutual relation and confirmation among the background art, the technical problem and advantageous effects recited in the description. When determining the technical problem to be solved by the patent, we shall take the technical problem recited in the description as a basis and take comprehensive account of the contents, such as the background art and its technical defects, and advantageous effects achieved by the patent in suit over the background art. The technical features per se recited in the independent claims are not the basis for determination of the technical problem to be solved by the patent."

"The `technical problem' mentioned in Rule 21.2 of the Implementing Regulations of the Patent Law is different from the technical problem to be actually solved by the patent redetermined according to the distinguishing technical features of a claim over the closest prior art when judging whether the claim involves an inventive step."

2. T2001/12 at the EPO's Boards of Appeal

The applicant filed an appeal to the EPO's Boards of Appeal against the decision refusing the European patent application No.08764638.6, entitled "memory device and its reading method", as not meeting the requirements of Articles 83, 84 and 54 of the European Patent Convention (EPC).

Claim 1 of the patent in suit is related to a memory device which was supported to be capable of "reducing the voltage for writing and erasing to approximately 70% or less of the program voltage of a conventional planar type device"

according to the description. In relation to the "essential technical features" requirement under Article 84 EPC, the examining division found that claim 1 did not define the features which would enable the above-mentioned effect to be obtained, and the requirements of Article 84 of the EPC were not met because the claim did not recite all the features essential for the definition of the invention. The Boards of Appeal, however, held a negative view towards this decision for the following two reasons: firstly, in the section entitled "Problem to be Solved by the Invention", several problems are mentioned, including providing a "memory device which can reduce the voltage for writing and erasing". However, although the disputed effect of "reducing the voltage for writing and erasing to approximately 70% or less of the program voltage of a conventional planar type device" is mentioned in the description, achieving this effect is not stated to be the problem to be solved by the invention. There is therefore no basis for arguing that features necessary to achieve this degree of reduction are essential to the definition of the invention. Secondly, even if it were accepted that the technical problem underlying the invention is to "reduce the voltage for writing and erasing to approximately 70% or less of the program voltage of a conventional planar type device", the claims did include the corresponding technical features necessary for solving the technical problem. Notably, in the present case, the Boards of Appeal made a strict distinction between the technical problem and the technical effect, which was quite different from the usual cases.

The Boards of Appeal in the present case took a view that the technical problem which the essential technical features in a claim are intended to solve must be recited in the description:

"[e]xamination for compliance with this requirement (namely, Article 84 EPC) does not entail, and is independent of, a comparison of the claimed invention with the prior art, other than to determine whether there is consistency between the claims and the description in relation to any prior art cited in the application with respect to which the invention has been disclosed";

"a doubt that the invention as claimed is capable of solving the problem defined in the application may have the following consequences:

if the question arises because the claim fails to specify those features which are disclosed in the application as providing the solution to the problem, then the description and claims are inconsistent in relation to the definition of the invention, and an objection under Article 84 EPC 1973 may properly arise that

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the claims do not contain all the essential features necessary to specify the invention". T2001/12, point 4.4.

It is so far unclear whether the above way of determination of the technical problem to be solved for defining the essential technical features will be incorporated into the case law.

II. "Essential technical features" and the technical problem to be solved

Rule 20.2 of the Implementing Regulations of the Patent Law of 2010 provides that an independent claim shall outline the technical solution of an invention or utility model and state the essential technical features necessary for the solution of its technical problem. In light of Section 3.1.2, Chapter Two, Part II of the Guidelines for Patent Examination (2010 edition, the same below), essential technical features refer to the technical features of an invention or utility model that are indispensable in solving the technical problem and the aggregation of which is sufficient to constitute the technical solution of the invention or utility model and distinguish the same over the technical solutions described in the background art. In view of patentability, essential technical features included in the independent claim "have two meanings: one is that the independent claim shall outline the technical solution of an invention or utility model wholly, rather than only one or a few of the components, and the other is that the independent claim shall state all the essential technical features necessary for the solution of its technical problem, in other words, the technical solution claimed in the independent claim can solve the technical problem to be solved as recited in the description, and the technical solution and the technical problem to be solved shall correspond to each other." Yin Xintian (March 2011). Detailed Annotation of the Chinese Patent Law (1st ed., p.369).

1. "Essential technical features" requirement and provisions on the "support" and "clarity" issues under Article 26 of the Patent Law

Article 26.4 of the Patent Law provides that the claims shall be supported by the description and shall define the extent of patent protection sought for in a clear and concise manner, which mainly conveys two meanings: one is that the claims shall be supported by the description, to put it another way, the scope of rights sought for by the patentee by means of the claim set shall accord with the disclosure of the invention to the public and the contributions of the invention to the prior art, and the other is that the claims must be clear and concise, which is the basic requirement of the "notice function" of

claims.

"Different from Rule 21.2 of the Implementing Regulations of the Patent Law that is only applicable to circumstances where the independent claim lacks essential technical features, Article 26.4 of the Patent Law can be used in a broader sense, i.e., it is applicable not only to independent claims but also to dependent claims, not only to the circumstances where the technical features (e.g., functional technical features) in the claims are defined in a way too broad to be supported by the description, but also to the circumstances where independent or dependent claims lack essential technical features such that the technical solutions defined in the claims cannot solve the technical problem to be solved by the patent, and that a claim as a whole is not supported by the description." The Supreme People's Court's Administrative Judgment No. Xingtizi 13/2014.

Pursuant to the provisions in Section 3.2.1 "Support in the Description", Chapter Two, Part II of the Guidelines for Patent Examination, if the generalization of a claim is such that the

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person skilled in the art can reasonably doubt that one or more specific terms or options included in the generic terms or parallel options cannot solve the technical problem aimed to be solved by the invention or utility model and achieve the same technical effects, it shall be taken that the claim is not supported by the description. Thus, in the matter of "support", account shall be taken of whether the technical solution of the claim can solve the technical problem aimed to be solved by the invention or utility model.

The provisions on "clarity" in Section 3.2.2, Chapter Two, Part II of the Guidelines for Patent Examination mainly concern the cases where the claims are rendered unclear due to inappropriate language or terms. Additionally, a claim may be unclear due to failure to clearly define the relationship between, for instance, two features. In this case, the "clarity" requirement and the "essential technical features" requirement might overlap each other to some extent.

Hence, the "essential technical features" requirement and the

provisions of Article 26.4 of the Patent Law overlap each other in terms of application range but with their respective emphasis. In practice, the "essential technical features" requirement puts more emphasis on delimitation of the technical features of a claim according to the technical problem to be solved by the invention.

2. Technical problem to be solved by essential technical features

There are generally two types of technical problems to be solved by an invention: (1) "objective technical problem" to be solved by an invention that is determined in view of the closest prior art when judging whether an invention involves an inventive step, such as the technical problem stipulated in Section 2.2.4, Chapter Two, Part II of the Guidelines for Patent Examination, Section 5.2, Chapter VI, Part G of Guidelines for Examination in the EPO or Annex of Chapter 13 of the PCT International Search and Preliminary Examination Guidelines; and (2) "subjective technical problem" recited in the description that is determined by an applicant according to the prior art he or she grasps.

It is stipulated in Section 5.1 "judgment on essential technical features", Chapter Two of Implementing Rules for Patent Examination (2011 revised edition) that "in judging whether a technical feature is essential or not, it is necessary to consider the technical problem to be solved by an invention while bearing in mind the entire contents described in the description", and the technical problem can be (1) the one explicitly recited in the description; (2) the one directly determined through reading of the description; and (3) the one that can be determined according to the technical effect or technical solution recited in the description.

As to "objective technical problem" standard, some experts deemed that "essential technical features in a technical solution, namely technical features necessary for `solving the technical problem', are important technical features in the claimed technical solution which are closely related to the inventive step and the gist of the invention". Some experts opined that the technical problem for judging essential technical features of a claim refers to "the prior-art problems to be solved by an invention or utility model and the technical problems to be actually solved by the invention or utility model."

In the before-mentioned invalidation case involving the invention patent entitled "carriage for motor vehicles", the PRB determined the technical problem to be solved by the invention according to the technical solutions defined in the claims, thus

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the technical problem seems to be like an "objective technical problem". However, it is apparent that the Supreme People's Court's ruling is in support of the "subjective technical problem" standard, which further highlights the importance of the "essential technical features" requirement.

III. Provisions on essential technical features in other countries or regions

1. Provisions on essential technical features in Europe

Article 84 of the EPC provides that the claims shall define the matter for which protection is sought; and they shall be clear and concise and be supported by the description. The Case Law of the EPO's Boards of Appeal stated "this has to be interpreted as meaning not only that a claim from a technical point of view must be comprehensible, but also that it must define clearly the object of the invention, that is to say indicate all the essential features thereof. As essential features have to be regarded all features which are necessary to obtain the desired effect or, differently expressed which are necessary to solve the technical problem with which the application is concerned." T32/82. Similar provisions can also be found in Section 4.5.2, Chapter IV, Part F of Guidelines for Examination in the EPO. In particular, where patentability depends on a technical effect, the claims must be so drafted as to include all the technical features of the invention which are essential for the technical effect. Ibid.

Moreover, Article 84 of the EPC as regards the requirement for the claims to be supported by the description is applicable to all the features described in the description as being necessary to carry out the invention. T1055/92.

Before the decision of T2001/12, the EPO usually considers that the requirement for essential technical features corresponds to the "objective technical problem". For instance, the Boards of Appeal decided that "having regard to the fact that in the decision under appeal the Examining Division has not mentioned any prior art document, it appears appropriate to the Board to consider the technical problem, identified by the Appellant, to be the objective problem to be solved by the invention", and "during proceedings before an Examining Division, it often happens that pertinent documents are cited with the result that the core of a claimed invention has to be changed and also the corresponding problem to be solved appears in a modified form. In such cases often new essential features must be added to the claim......" Ibid.

2. Provisions on essential technical features in U.S.

There are no provisions on essential technical features in the U.S. Patent Act. The provision that is closest to Rule 20.2 of the Implementing Regulations of the Patent Law in China is 35 U.S.C. 112 (a) regarding "written description", which states that the specification shall contain a written description of the invention, ....to be specific, the specification shall "describe the invention to such a sufficient extent that a person ordinarily skilled in the art is able to know that the patentee has created the invention sought for protection by the filing date thereof". Lizardtech v. Regents of Univ. of Cal., 424 F.3d 1336, 1345 (Fed. Cir. 2005). The issue concerning whether the specification provides a sufficient description is likely to occur when the original claims provide no sufficient information, when a claim is added or modified to thereby increase or delete features defined in the claim, or when a priority date or effective filing date is claimed or in an "interference" proceeding.

It can thus be seen that the "written description" requirement under the U.S. Patent Act contains not only the requirement for the claims to be "supported" by the description, but also the requirement for prevention of "amendments from going beyond the initial disclosure". However, the denotative meaning of the "written description" requirement is in fact much wider than the combination of the latter two requirements, and the application thereof overlaps that of the provisions on the "utility" or "enablement" in the U.S. Patent Act. The key issue for determining compliance with the written description requirement is "whether the description clearly allows a person ordinarily skilled in the art to recognize that he or she invented what is claimed". In re Gosteli, 872 F.2d 1008, 1012, 10 USPQ2d 1614, 1618 (Fed. Cir. 1989).

In the Case Law, no special consideration was taken of essential technical features. In Gentry Gallery v. Berkline, the United States Court of Appeals for the Federal Circuit relied in part on the following facts to invalidate the patent: the original disclosure clearly indicates the console as the only possible location for the controls, an object of the present invention is to provide ... a console positioned between [the reclining seats] that accommodates the controls for both of the reclining seats, and the amended claims fail to define the control on the console. Gentry Gallery, Inc. v. Berkline Corp.,134 F.3d 1473, 45 USPQ2d 1498 (Fed. Cir. 1998). A similar case is Trozo v. BioMet, in which the United States Court of Appeals for the Federal Circuit found that the specification describes the particular conical shape as shown in the patent in suit was "an extremely important aspect" of the present invention, and concluded that the claim lacking said feature was invalid. DR. RAYMOND G. TRONZO,v. BIOMET, INC.,156 F.3d 1154, 47

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USPQ2d 1829 (Fed. Cir. 1998).

In Curtiss-Wright Flow Control v. Velan, the patent relates to a system for de-heading a coke drum in petroleum refineries. The United States Court of Appeals for the Federal Circuit overruled the district court's claim construction on the grounds that that construction is too broad and the district court did not pay enough attention to how the specification characterized the invention:

"the '714 patent specification further extols this invention for overcoming these deficiencies of the prior art:

Another critical aspect of the present invention is the ability to de-head the coke drum without having to remove the head unit, and to do so at a remote location with little or no manual requirements.

The '714 patent then associates the adjustability of the live loaded seat with that critical aspect of the invention. In other words, the patent stresses that adjustment occurs during operation and without removal of the head unit."

"The specification stresses that the invention is `adjustable' during de-heading. Any construction to the contrary is not consistent with the overall context of this invention and this field of art as described in the specification." Curtiss-Wright Flow Control Corp. v. Velan, Inc., 438 F.3d 1374, 77 USPQ2d 1988 (Fed. Cir. 2006).

To sum up, in the U.S., the test of "whether the patentee has created the invention sought for protection by the filing date thereof" is applied to judge whether a technical feature is an essential technical feature of an invention in the context of the specification.

3. Provisions on essential technical features in Japan

Article 36.5 of the Japanese Patent Act provides that the scope of claims shall state for each claim all matters necessary to specify the invention for which the applicant requests the grant of a patent. "`All matters necessary to specify the invention' refer to all the technical features that are necessary for specifying the invention in the applicant's view. In such cases Article 36.5 of the Japanese Patent Act does not constitute grounds for rejection and invalidation." Kim et.al., On requirements for essential technical features in China and Japan. Implementing national IP strategies to promote the development of patent agency industry-----Essays in 2010 ACPAA Annual Meeting cum 1st IP Forum.

IV. A moderate role of the "technical problem" in

determination of essential technical features being desired

Apparently, views towards the technical problem are diverse in different countries when determining essential technical features in the claims. China and Europe put stress on the technical problem to be solved by the invention, whereas the U.S. and Japan do not accentuate the requirement for such a technical problem or even have no requirement at all.

As stated above, except for emphasis on the technical problem, the "essential technical features" requirement substantially overlaps the provisions on the "support" and "clarity" issues. In Europe, the "essential technical features" requirement is regarded to be one aspect of the "clarity" requirement of claims. The U.S. the "written description" requirement also overlaps the requirements for "utility", "enablement" and "new matter" to a large extent. Thus, when discussing the significance of the "essential technical features" requirement, the most important thing is to clarify the limitative function of the technical problem to be solved by the invention to the claims, in other words, whether it is necessary to emphasize the technical problem to be solved by the essential technical features and whether to adopt "subjective technical problem" standard or "objective technical problem" standard?

In the above-mentioned invalidation case involving the invention patent entitled "carriage for motor vehicles", the Supreme People's Court opined that "where the description explicitly recites that the technical solution of the patent is able to solve several technical problems simultaneously, it indicates that the applicant has clearly stated concurrent technical improvements need to be made by the technical solution of the patent in several aspects. The capability of solving several technical problems at the same time constitutes advantageous effects of the patented technical solution and will have substantial influences on the patent grant and validation, as well as on the protection of the patent after grant. Therefore, where the description explicitly recites that the technical solution of the patent is able to solve several technical problems simultaneously, the independent claim shall contain all the essential technical features capable of solving those technical problems at the same time."

The above articulation made by the Supreme People's Court is quite similar to the rationale for the doctrine of file history estoppel, i.e., to prevent a patentee from obtaining a patent by

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taking advantage of amendments or statements made to the patent application and then recapturing the contents abandoned under the doctrine of equivalents. However, no matter for examination of essential technical features during the grant and validation procedures or for determination of equivalent features in the infringement lawsuits by the courts, the technical problem to be solved or advantageous effects brought by the invention is not considered alone but is connected to the technical features defined in the claims.

During examination on patentability, particularly inventive step, examiners would make reference to the technical problem to be solved by the invention and advantageous effects thereof stated by the applicant, and more importantly, compare the invention with the closest prior art to re-determine the "objective technical problem" before making a determination. As regards examination on the "essential technical features" requirement, Implementing Rules for Patent Examination stipulate in Section 1.1.1, Chapter Two that "where the description recites that a claimed technical solution can solve several technical problems, it is considered that the requirement for `solving the technical problems' is met insofar as at least one of the technical problems can be solved by the technical solution." It can thus be seen that the SIPO and the PRB take a relatively lenient attitude towards the "subjective technical problem".

During patent grant examination, an applicant tends to amend the claims in order to overcome such defects as lack of novelty, inventive step or support, but does not necessarily make amendments to the description of the technical problem to be solved by the invention as originally filed for the sake of consistency. It results in that, strictly speaking, the technical solutions of many granted claims do not accord with the technical problems described in the description. To determine the essential technical features of an independent claim simply according to the technical problems and advantageous effects recited in the description without bearing in mind the above issues will render a large number of granted patents to be invalid or the protection scopes thereof to be narrowed down unreasonably. What's worse, there is an objective fact that the patentee is unlikely to realize the technical problems to be solved by an invention accurately at the time of filing due to factors such as cognitive limitations or insufficient search.

The "technical problem" to be solved by an invention is not directly involved in infringement lawsuits, in particular in determination of equivalent infringement through the "tripleidentity" test. When comparing a technical feature defined in a claim with a corresponding feature in the allegedly infringing

product, a judge, though not strictly distinguishing "technical problems" from "technical effects", will objectively take account of the technical problems to be actually solved or advantageous effects brought by relevant technical features, without being affected by the patentee's subjective depiction in the description. If a patentee has made restrictive interpretation or amendments to the claims during patent grant examination for the purpose of obtaining the patent right, the protection scope of the granted invention will be limited due to the doctrine of "file history estoppel". The patentee will in no way get the benefits incompatible with the contributions made by him to the prior art just because of the depiction about the technical problems to be solved in the description.

In a word, "since `the technical problem to be solved' differs from the nature of the closest prior art, it is, in some sense, a subjective assessment on the value of an invention or utility model. It is questionable whether `the technical problem to be solved' can be used to judge the practical requirement of an independent claim", "and there are also problems in how to draft an independent claim under such a requirement". Yin Xintian (March 2011). Detailed Annotation of the Chinese Patent Law (1st ed., p.370).

Is it possible to determine essential technical features of a claim totally based on the "objective technical problem" without considering the technical problems stated by the applicant in the description? The answer is no. We should certainly take into account the description which, as the most relevant and convincing evidence to assess the invention contents, reflects an inventor's own view towards his or its invention, not to mention the influence of the technical problems recited therein on patent grant, validation and infringement.

Another problem for the "objective technical problem" standard is that the technical problem to be solved and other sections in the specification must be treated differently. The sections in the specification, including background art, summary of the invention and detailed description of the preferred embodiments, directly show the inventor's cognition and attitude towards the present invention and the contents the inventor wants to present to the public. The "objective technical problem" standard places the "technical problem" under an uncertain state regardless of the applicant's cognition, which is not desired by the applicant. It is reasonable to apply the "objective technical problem"

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standard to assess whether an invention involves an inventive step over the prior art, but it seems to far-fetched to apply the "objective technical problem" standard to assess the contents of an invention made by the inventor.

As known from the two cases concerning essential technical features in both China and Europe at the beginning of this article, one of the factors to be considered when determining essential technical features is "the consistency between the claims and the description", that is to say, "Rule 21.2 of the Implementing Regulations of the Patent Law aims to further standardize the corresponding relationship between the description and an independent claim (which has the broadest protection scope among the claims in the claim set) such that the technical solution defined in the independent claim conforms to the contents, in particular the background art, the technical problems and advantageous effects, as recited in the description", the Supreme People's Court's Administrative Judgment No. Xingtizi 13/2014, and "this requirement to eliminate inconsistency between the claims and the description also implies that where an invention has been presented in the description in terms of a modification of prior art which is cited or otherwise acknowledged in the application, the modifying features must be seen as essential". T813/03, point 5.1. The "objective technical problem" standard obviously fails to satisfy the above "consistency" requirement.

3. The "technical problem" to be solved in defining the essential technical features ought to be less considered

We are confronted with the dilemma of whether to use the

When judging whether a feature is an essential technical feature, account shall be taken of the patentee's depiction of an invention in the specification, and other internal and external evidence such as prosecution history, for instance, the patentee's observations made during examination, while weakening the role of the technical problems in this regard.

"objective technical problem" standard or the "subjective technical problem" standard, such that we have to trace back to the legislation of the Patent Law to review the significance of the requirement for "essential technical features".

"The disclosure required by the Patent Act is the quid pro quo of the right to exclude." J.E.m. Ag Supply, Inc. v. Pioneer Hi-Bred Int'l, Inc., 534 U.S. 124, 142 (2001). The tenet of the Patent Law to encourage inventions and creations is achieved by providing a patentee with patent protection compatible with the contributions he or she made to the prior art. With the invention created, the inventor is expected to sufficiently describe his or her invention (including the technical problems to be solved thereby) according to his known knowledge, thereby enabling the public to know and carry out the invention. So far, the inventor has fulfilled the obligation of disclosing the invention in good faith. From the specification

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we can determine the inventor has created the claimed invention by the filing date. If the contributions made by the inventor to the prior art were negated simply because of the inconsistency between the technical solutions defined in the claims and the technical problems subjectively recognized by the applicant in the specification without taking into account other factors, this is obviously against the fundamental tenet of the patent system and is too strict to an applicant.

The kernel of an invention is the technical solutions provided by an applicant for solving the technical problems. Technical problems are of ultra importance when evaluating the inventive step of an invention as being advantageous to making an objective assessment of the contributions made by the inventor to the prior art. However, if the technical problems still surpass the depiction of other technical features disclosed in the invention when judging whether an applicant discloses the invention sought for protection, it will not help us have an accurate understanding of the invention-creation made by the inventor.

Although it seems that T2001/12 in EPO adopts the "subjective technical problem" standard, the EPO is very lenient in determining the technical problems.

The U.S. Patent Act does not accentuate the technical problems recited in the description for a patent, but pay attention to "whether the patentee has created the invention which is claimed by the filing date" so as to weigh if the protection scope of the claims is defined appropriately. "The `essential goal' of the description of the invention requirement is to clearly convey the information that an applicant has invented the subject matter which is claimed." In re Barker, 559 F.2d 588, 592 n.4, 194 USPQ 470, 473 n.4 (CCPA 1977). Another objective is to put the public in possession of what the applicant claims as the invention. Regents of the Univ. of Cal. v. Eli Lilly, 119 F.3d 1559, 1566, 43 USPQ2d 1398, 1404 (Fed. Cir. 1997), cert. denied, 523 U.S. 1089 (1998). Obviously, such an examination criterion is more compatible with the legislative tenet of the Patent Law.

Thus, when judging whether a feature is an essential technical feature, account shall be taken of the patentee's depiction of an invention in the specification, and other internal and external evidence such as prosecution history, for instance, the patentee's observations made during examination, while weakening the role of the technical problems in this regard. The Japan's views on essential technical features are also worth pondering over.

V. Conclusion

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What is the rationale for the "essential technical features" requirement? There has not been a thoroughly detailed presentation. Although the "essential technical features" requirement is provided for in the Implementing Regulations of the Patent Law, it is on an equal footing to other substantive clauses in the Patent Law and often cited in patent prosecution and invalidation.

The key to determine essential technical features of a claim is the technical problem to be solved by the invention. The patentee will recite the technical problem in the description, just like other technical features, except that the technical problem has to be materialized through corresponding technical features in the claims. Over-emphasis on determination of the technical problem will put it in an aloof position, which might overly limit the protection to the invention-creation made by the patentee.

Since Article 26.4 of the Patent Law can also function to judge whether "essential technical features" in the claims are missing or not, and meanwhile the role of the technical problem in determination of essential technical features shall be weakened, it is high time that we discussed the significance of "essential technical features" on the opportune occasion when the Fourth Revision to the Patent Law of China is in the making.

Suppose it is necessary to maintain the "essential technical features" requirement, it is suggested that that requirement not listed as the ground for rejection or invalidation, and the Guidelines for Patent Examination shall further clarify the method for judging essential technical features, especially how to determine the technical problem.

At present, it is preferable that the applicant describes the technical problem to be solved by an invention with a hierarchy when drafting an application for patent, and makes the technical problem compatible with the technical effects. Negative sentences (e.g., a method cannot be operated if the temperature is high than a certain value) shall be avoided in the description unless necessary in order to prevent the case that relevant features are regarded as "essential technical features" during prosecution and invalidation.

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HOW TO OBTAIN EFFECTIVE PATENT PROTECTION Tips for Drafting a Patent Application in China

Author: Xiaowei Wei

An increasing number of foreign enterprises and individuals have filed Chinese patent applications in recent years. However, as the patent laws and regulations of China contain provisions not found in other jurisdictions, it is necessary to adopt an effective strategy when drafting a patent application that aligns with domestic patent practice so as to obtain effective patent protection in China.

Use different degrees of generalization and technical perspectives to describe key technical content

The Patent Law and Examination Guidelines have strict provisions in respect of amendment. Namely, amendments to patent application documents should be documented in the original description and claims, or be capable of being directly and unambiguously determined from the original description and claims.

More specifically, if the original application documents only describe specific technical content, further summation or generalization of the technical content will normally not be permitted once the application has been filed. If the broad scope sought in the original claims is challenged by prior arts, the applicant will have to limit their claims in line with the specific technical content in the original description, resulting in an unduly narrow scope of protection.

Accordingly, it is necessary for the applicant to use different degrees of generalization and technical perspectives in describing the key technical content in the patent application description. For example, if the specific technical content is the formula G=R2+R and R>1, a number of intermediate generalizations can be added in the original description based on the function of the formula in the technical solution, e.g. G increases as R increases; when R increases by a specific quantity, G will increase by a quantity greater than the specific quantity; when R=0, G=0 and the like.

Using different degrees of generalization and technical perspectives to describe key technical features makes it much easier to amend the claims as desired after the application has been submitted so as to avoid having to unduly narrowly narrow down the claims in order to get the patent allowed.

Place important technical features in dependent claims

The examination guidelines stipulate that the specific methods of revising claims once a patent has been granted are generally limited to the deletion and combination of claims and the deletion of technical solutions. Furthermore, in general, technical features not included in granted claims may not be added to claims.

Here it can be seen that once a patent has been granted, a patent holder may not use content in the description to overcome deficiencies, even where the description contains technical content that can overcome deficiencies in the claims. Accordingly, dependent claims may be the only means of

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remedying a fatal deficiency in an independent claim.

Given these strict limitations on revision once a patent has been granted, important technical content should be included in the dependent claims when drafting the patent application to the greatest extent possible, so that the dependent claims can serve as a sturdy bulwark that makes up for the deficiencies in the independent claims. Dependent claims should address not only challenges posed by prior art, but also possible deficiencies, e.g. a lack of clarity in the independent claims or lack of support for a technical solution from the description, so as to sufficiently fulfil their protective role.

Do not unbendingly pursue the broadest scope of protection

The doctrine of equivalents may be applied in domestic patent infringement actions, while the doctrine of estoppel can constitute a limitation on application of the doctrine of equivalents.

Accordingly, if a claim is granted after amendment and statement of limiting opinions, it is likely to be subject to the doctrine of estoppel in a patent infringement action. If a similar claim has not been subject to substantial amendment or a statement of limiting opinions, it may better be able to enjoy the application of the doctrine of equivalents. Accordingly the unbending pursuit of the broadest scope when drafting a patent application may produce the opposite result, while drafting claims with the appropriate scope of protection may, contrarily, be more beneficial in an infringement action.

A stable right is a key condition to securing effective patent protection. Due to strict limitations on revision once a patent has been granted as mentioned above, carrying out sound revision when responding to an Office Action is conducive to securing a stable right. Putting one's hopes on remedies that may be available after the granting of a patent, meanwhile, could expose one to numerous significant risks.

Draft several types of independent claims for a computerrelated patent application involving computers

Although there has been a large number of computer-related patents granted in China, patent infringement cases have not clearly indicated what kinds of claims can effectively protect computer-related inventions or how the scope of protection of such claims is to be interpreted. To the contrary, these cases serve more to demonstrate that the requirements in respect to the drafting of patent documents are inconsistent between the courts and the patent office.

To most effectively respond to the uncertainty existing in patent infringement judicial procedure, we would recommend that several types of claims be included in applications for computer-related patents. These could include process claims, apparatus claims comprising functional modules and apparatus claims comprising specific hardware + processor/ controller. A detailed description of the hardware environment should also be provided in the description.

Chinese patent laws and regulations may contain provisions not found in those of other countries, but fully understanding and addressing these provisions in drafting patent applications as described above is conducive to securing more effective patent protection in China.

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EFFECTIVE APPROACHES TO FIGHT AGAINST PATENT INFRINGEMENT IN CHINA

Author: Guoxu Yang

Patent infringement happens frequently because many people lack awareness of patent protection or are driven by the interest of high profits. In China, there are two alternative routes to stop patent infringement: the judicial route and the administrative route.

The administrative route may take less money and time than the judicial route. The administrative authority in the administrative route, however, does not have the power to award damages but only to issue an injunction order, so its ability to combat patent infringement is relatively weak. So, many patentees prefer to choose the judicial route to pursue infringers, i.e., request the court issue an injunction order and award damages, by which the patentee may be able to stop the infringement through increasing the cost of infringement to the infringer.

However, the judicial route may take a relatively long time. Though the law stipulates that the first instance should be completed within six months for a dispute between or among domestic parties, and that the second instance should be completed within three months, the actual situation is that a patent infringement case can rarely be concluded within the time limits. There is not even a time limit for cases where at least one party is a foreign entity or individual. A patent infringement

case may take one year or several years from its start to be concluded.

In addition, even when the patentee wins the case and gets damages, the damages awarded by the courts are generally very low in China. According to some investigation on the damages of patent infringement cases, the average amount is just about Rmb80,000 (US$12,500). The main reason for this is that it is difficult for the patentee to collect evidence of actual damages without a discovery procedure. The courts normally would apply statutory damages based on the nature of the patent right, the scope of the patent infringement, etc. Moreover, some infringers may transfer their properties when they anticipate that they will lose the case. Sometimes, the patentee will not get a penny from the infringer even when he wins the case.

In spite of the above problems, to combat patent infringement effectively, some effective measures can still be taken based on sophisticated considerations.

Seeking a Preliminary Injunction

A preliminary injunction is one of the remedies available to patentees under the Chinese Patent Law. It may be requested prior to the filing of a lawsuit or at the time of filing a lawsuit. If

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the petition is allowed by the court, the infringer must stop the infringing activities immediately. An instant effect may be achieved.

The court would primarily consider factors such as the likelihood of infringement, the validity of the patent right, whether irreparable harm would be caused to the patentee if the infringement is not stopped timely, etc. In addition, the petitioner would also be requested to pay a certain bond or security fee in case damages are caused to the defendant if the preliminary injunction is made incorrectly. Lastly, the court needs to consider whether the granting of the preliminary injunction may affect the public interest.

Because the granting of a preliminary injunction against the defendant would have a significant effect on the defendant, the Chinese courts are normally prudent in allowing the preliminary injunction petition filed by the patentee. In addition, the meaning of "irreparable harm" is not quite clear under Chinese patent law, which may also be a barrier to granting a preliminary injunction order for the courts.

In 2013, our firm successfully obtained a preliminary injunction order in a patent infringement case in the Beijing Third Intermediate Court on behalf one of our clients, because we successfully persuaded the court that an "irreparable harm" would be caused to our client if the infringing act of the infringer was not checked out timely. This is the first patent infringement case in Beijing in which a preliminary injunction order was granted.

Because the defendant was ordered to stop infringement immediately by the court, the defendant was anxious to reach a settlement with our client, due to the great pressure brought about by the preliminary injunction. The client got a very positive result for this case. The case was also listed by the Supreme People's Court as one of the five notable cases in 2014.

Requesting the Court Take a Property Preservation Measure

Where the probability the plaintiff would win the case is very high, to avoid the infringer from transferring property and to ensure that the judgment regarding damages could be enforced, the plaintiff may request the court to take a measure of property preservation, which is available under the civil procedure law of China. The most frequent property preservation measure is to partially freeze the account of the defendant. By doing so, after a court judgment takes effect, if the defendant refuses to follow the judgment and pay the

damages, the plaintiff may request the court to transfer money from the account of the defendant as the damages awarded by the court. When the capital in the defendant's bank account is frozen, the defendant may have strong wishes to reach a settlement with the plaintiff due to the shortage of capital. The case could then be concluded swiftly. The efficiency of the protection of the patent right could be raised.

When the court grants a property preservation measure, the court would consider primarily the likelihood of infringement; the necessity of preserving the property, i.e., if there is a strong risk that the defendant may transfer his money to escape the damages liability; and whether the plaintiff provided the required bond, which is used to pay damages to the defendant if the plaintiff loses the case. In patent infringement cases, the success rate of getting an order from the court for property preservation measure is much higher than that of getting an order for preliminary injunction. This is a means that may be used by the patentee legitimately.

Requesting the Infringer to Sign an Agreement to Promise not to Infringe Again and Set a High Amount of Damage that the Infringer Needs to Pay if the Infringer Infringes Again

As stated beforehand, it is usually difficult for a patentee to collect the evidence of actual damages. In view of the general burden of proof allocation principle, which is "he who claims who will have the burden of proof," the court would apply the statutory damages according to the provision of the Chinese patent law if the patentee could not prove the profit loss, the illegal gain of the defendant and no reference of the royalty fees, i.e., the court may determine the statutory damages somewhere between Rmb10,000 to Rmb1 million (US$1,560 to US$156,600). This is one of the biggest challenges for patentees in China.

China is considering adopting the punitive damages system similar to that of the US, but for the moment, Chinese courts do not support punitive damages for willful patent infringement. In a case where the infringer infringes repetitively, the patentee must once again use the procedure he has already used (a from which he could not get any punitive damages, which may be higher than actual damages). Because of the high cost for patent enforcement and the oftenunsatisfactory result, it is very hard to stop repetitive infringement, and threats of legal action have no frightening effect on the infringer of willful infringement. Normally, we are inclined to suggest that our client sign a reconciliation agreement with the infringer, prescribing that the infringer

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agrees to pay a damage of a relatively high amount once he infringes again. If the infringer infringes again, the patentee may ask the court to enforce the agreement and request the infringer to pay the damages as agreed in the reconciliation agreement.

In the retrial case between Zhongshan Longcheng Ltd. and Hubei Tongba Ltd. ((2013) Mintizi No. 116), the Supreme Court supported Zhongshan Longcheng's claim that Hubei Tongba should pay the damages of Rmb1 million (US$156,600) according to the reconciliation agreement entered between the two companies in the previous patent infringement litigation.

In this case, Zhongshan Longcheng sued Hubei Tongba for patent infringement for the first time in 2008. Zhongshan Longcheng won the case in the court of the first instance. Hubei Tongba appealed to the higher court; the appeal was settled through mediation organized by the higher court. The two parties entered into a reconciliation agreement providing that Hubei Tongba promised not to infringe Zhongshan Longcheng's patent in the future. Hubei Tongba agreed to pay Zhongshan Longcheng Rmb1 million as damages if it repeatedly infringed Zhongshan Longcheng's patent in the future.

In 2011, Zhongshan Longcheng found Hubei Tongba had infringed its patent again and sued the company for the second time. In the second lawsuit, Zhongshan Longcheng claimed that Hubei Tongba should pay Rmb1 million as the damages according to the reconciliation agreement. Unfortunately, neither the intermediate court nor the higher court supported Zhongshan Longcheng's claim but awarded Rmb140,000 (US$21,900) as statutory damages rather than Rmb1 million as provided in the reconciliation agreement. Zhongshan Longcheng filed a retrial request with the Supreme Court.

The Supreme Court reversed the previous decisions of the lower courts and supported Zhongshan Longcheng's claim for damages and held that the intrinsic nature of the agreement is a pre-concluded practical method to determine the actual loss of the patentee, or the profit of the infringer attributable to the patent infringement in the future. Considering the difficulties related to evidence collection and the heavy burden of lawsuit, the court reasoned, it was legitimate for Zhongshan Longcheng and Hubei Tongba to enter into an agreement providing the method of determining damages, either prior to or after infringement.

Later, in the proposed Supreme Court Interpretation on patent

infringement, there is also a provision reflecting the spirit of the case, i.e. "the agreement reached by parties on the amount or method of determining damages is legitimate and applicable." The proposed Supreme Court Interpretation on patent infringement is under the process of evaluation for approval.

In summary, a patentee may achieve a very good result by taking advantage of suitable legal measures in patent infringement litigation. Otherwise, even if the patentee wins the case, he may lose money and may not reach the expected result. Of course, a good legal measure may also be a doubleedged sword, and a party may be hurt by the measure if it is not used well. For example, the patentee should be very careful when considering whether it will request the court grant a preliminary injunction order and property preservation measure. The patentee should assess the validity of the patent and the likelihood of infringement to avoid affording the liability of damages. However, this cannot be realized without the assistance and involvement of a patent attorney with extensive experience. It is highly recommended that the patentee retain a Chinese patent attorney involved in the enforcement of patent rights in China.

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MULTIPLE DESIGN APPLICATION IN CHINA

Articles

Author: Xiaojun Guo

I. Introduction

Article 31 paragraph 2 of the Chinese Patent Law reads,

"An application for a patent for design shall be limited to one design. Two or more similar designs of the same product or two or more designs which are incorporated in products belonging to the same class and being sold or used in set, may be filed as one application."

Rule 35 paragraphs 1 and 2 of the Implementing Regulations of the Chinese Patent Law (i.e. the IRCPL) reads,

"Where two or more similar designs of the same product are filed in one application in accordance with the provisions of Article 31 paragraph two of the Patent Law, the other designs of the product shall be similar to the main design indicated in the brief description. The number of similar designs contained in an application for design shall not exceed 10.

The two or more designs belonging to the same class and being sold or used in set as referred to in Article 31 paragraph 2 of the Patent Law means that, each product incorporating the design belongs to the same class in the classification of products and is customarily sold or used at the same time, and the designs incorporated in each product have the same concept of design."

Rule 28 paragraph 2 of the IRCPL reads,

"Where a patent application for design is filed for two or more similar designs incorporated in the same product, one of these designs shall be designated as the main design in the brief description."

According to the above provisions, there are two cases where multiple designs are allowed to be incorporated in a single patent application for design, i.e. 1) similar designs of the same product and 2) designs of the products in set.

II. Similar designs of the same product

For example, similar designs of a meal plate may be contained in a singe patent application for design. However, in the case that the designs are incorporated in a plate, a dish, a cup and

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a bowl respectively, although the products belong to the same class in the International Classification for Industrial Designs (i.e. the Locarno Classification), they are not so called "same product". Even if the designs have the same concept of design, they cannot be contained in a singe patent application for design as similar designs of the same product. However, they can be contained in a singe patent application for design as designs of products in set.

In the brief description of the claimed designs, which is indispensable for a patent application for design, one of the designs shall be designated as the main design in the case of a patent application for similar designs. The remaining designs in the design application shall be similar to the main design for meeting the unity requirement. If a normal consumer finds that the difference between each of the remaining designs and the main design does not notably influence the overall visual effect of the product through an overall observation on them, the remaining designs might be deemed as similar to the main design. That is, other designs have one or more features the same as or similar to the features of the main design, and the difference between the main design and other similar designs lies in slight partial changes, the conventional feature of the type of the product, repeated arrangement of the units, the change of color, or the like. It doesn't require a similarity among all of the designs.

Finally, the number of similar designs in one design application shall be no more than 10.

III. Designs of products in set

The expression "two or more designs which are incorporated in products belonging to the same class and being sold or used in set" recited in Article 31, paragraph 2, requires not only that the products incorporating the designs belong to the same class in the Locarno Classification, but also that the products incorporating the designs have the same concept of design and are customarily sold or used at the same time, namely, when people use one product of the set, they often associate it with the existence of other products of the set. However, it does not necessarily mean use of the products of

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the set at the same moment.

So called "same concept of design" refers to the unity of the style of design of each product. Generally, the designs shall share the common dominating features of design.

A patent application for designs of products in set shall not include similar designs of one or more products of the set of products. That is, similar designs of the same product shall not be mixed with the designs of products in set.

IV. Invalidation, enforcement and double patenting

Although only one patent right is issued to multiple designs fulfilling the unity requirement and being contained in a single design patent, the patentee may enforce his or her patent right based only on one of the designs without being affected by the remaining ones. In an invalidation proceeding, should one of the designs be announced invalid, it doesn't go without saying that the remaining designs are invalid.

If designs which could be filed in a single patent application for design are filed separately and are granted design patents, it is risky that some of the design patents may be announced invalid in view of "double patenting".

Incorporating the designs fulfilling the unity requirement in a single patent application for design will not affect enforcement of the patent right essentially and at the same time could extend the protection scope effectively.

V. Conclusion

In addition to designs of products in set, similar designs (i.e. embodiments or variants) of the same product are allowed to be contained in a single patent application for design in China. Although the number of similar designs which are allowed to be incorporated into a single patent application for design shall be no more than 10, it has been a great improvement as compared to the previous practice and could reduce the filing fees and annual fees greatly.

On the other hand, since only one patent right will be issued to designs fulfilling the unity requirement, the designs contained in the design patent shall be transferred or disposed of simultaneously in order to ensure that no conflict of right occurred in the future.

According to Rule 42 paragraph 1 of the IRCPL, the applicant may file a divisional application for a patent application for multiple designs within two months of receipt of the Notice of Allowance for the parent application at the latest. In the case that the examiner raises an objection to the unity of a patent application for multiple designs, the applicant may file a divisional application by the due date for responding to the objection and without being limited to the above-mentioned two month time limit.

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PROTECTION OF MERCHANDISING RIGHTS IN CHINA

Author: Xiaojun Guo

The merchandising rights normally refer to but not limited to the commercial interests involved in a real character such as a celebrity, or in a fictional character such as an imagery character in movies, cartoons or animations. Until today, the merchandising rights have not been defined at the legislative level in China, yet their protection has already been seen in some cases.

In Apple Corps Limited v. the TRAB, the Beijing High People's Court affirmed that the merchandising rights in the name of a well-known band, the "Beetles", are protectable.

Against the trademark application No.4375006 for "TEAM BEATLES Plus the Chinese Characters for the `Beatles' and the figure", Apple initiated an opposition action on, inter alia, that said trademark violates its prior rights on the "Beatles". While the Trademark Office and the Trademark Review and Adjudication Board ("TRAB") all denied the opposition request, the Beijing First Intermediate People's Court made a decision vacating the TRAB's decision and holding that the merchandising rights, or more accurately merchandising interests, on the name of the Beatles band shall be protected. The TRAB appealed.

Note: According to the character merchandising report published by WIPO in 1994 , character merchandising can be defined as the adaptation or secondary exploitation, by the creator of a fictional character or by a real person or by one or several authorized third parties, of the essential personality features ( such as the name, image or appearance) of a character in relation to various goods and/or services with a view to creating in prospective customers a desire to acquire those goods and/ or to use those services because of the customers' affinity with that character.

On December 18, 2015, the Beijing High People's Court made the final decision, upheld the first instant decision by holding that the opposed trademark violates the merchandising rights on the Beatles band owned by Apple.

The Beijing High Court articulated that,

Literary and artistic works, names of works, names of characters, iconic names can essentially render the owners of said works or names goodwill, prestige or popularity thereby and the owners can gain economic benefits by combination of the goodwill, prestige or popularity with goods or services for commercial use. The above works or names can bring

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interests to their owners through commercial use, and are eligible for being protected as "prior rights". Since there is no provision of "merchandising rights" in the laws, it might be named as "merchandising interests". The name of the "Beatles" alleged by Apple can be the carrier for the merchandising interests ... The opposed trademark is designated to be used on goods "wallet, schoolbag, backpack" etc. which are everyday consumer goods, and on which well-known bands normally register their names so as to market their goods as souvenirs. The merchandising interests alleged by Apple therefore shall be extended on to those goods. Where the opposed trademark is similar to the band name the "Beatles", its application on wallet, schoolbag, backpack etc. will mislead the public to take the goods for originating from the Beatles band or being related with the Beatles, so as to damage the merchandising interests of Apple over the name of the Beatles band.

In DreamWorks Studio v. the TRAB, the Beijing High People's Court affirmed, in its decision of August 20, 2015, that the

merchandising rights on the movie name and movie character's name are also protectable, and supported DreamWorks' opposition against a trademark application No. 6806482 for "KUNGFUPANDA" on its merchandising rights on the movie name and movie character's name KungFu Panda.

According to the TRAB's decision, the merchandising rights are not statutory rights or interests stipulated in laws and DreamWorks failed to define the subjects and boundary of protection for said rights. Since the Beijing First Intermediate People's Court upheld the TRAB's decision on almost the same grounds, DreamWorks appealed.

In appeal, the Beijing High Court held that the prior rights against the registration of a trademark in Article 31 of the Trademark Law (2001) include not only those statutory rights clearly defined in existing laws, but also other legitimate interests that should be protected under the General Principles of Civil Law and other laws. When a movie name, a movie character or a movie character's name is so well-known that it is not restricted to the movie itself any more but that, when it is used with certain goods or services, the audiences would extend the recognition of and emotion to the movie to the the movie name or the movie character's name and transplant those onto the goods or services on which they are applied, and thus bestow on the right owner additional commercial value and transaction opportunities than distribution of the movie, the movie name, the movie character or the movie character's name constitute the "merchandising rights" subject to protection as "prior rights" under Article 31 of the Trademark Law. Should the well-known movie name, movie character or movie character's name be excluded from the civil rights and interests subject to protection by laws, while be registrable as trademark for goods or services of a business entity freely, it will not only encourage free-riding but also cause damage to normal order of competition in the market, which is obviously contradictory to the purpose of the Trademark Law.

The Beijing High Court found that KungFuPanda, as the movie name and the movie character's name, has been of high popularity among the relevant public, which is brought by the creative investment of DreamWorks, and that the business value and opportunities brought thereby are also attributable to the intensive investment of labor and capital. KungFu Panda shall be protected as the merchandising rights.

According to the Beijing High Court, when deciding whether a trademark being identical with or similar to a movie name or a move character's name violates the related merchandising

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rights, such factors as the degree of the popularity, influence of the name, and the likelihood of confusion should be considered. The protection scope of the merchandising rights doesn't extend to all goods and services.

Elsewhere, in the Michael Jackson case decided on November 5, 2015, the Beijing Intellectual Property Court denied protection of the name right of the deceased pop star Michael Jackson in an invalidation action initiated by the trustee of Michael Jackson's estate against the trademark registration No.8647078 in Class 25 for "MICHAEL JACKSON" owned by a Chinese company "Fujian Fengshang Fashion Co., Ltd.". According to the Court, since Michael Jackson has died, i.e. the subject carrying the name right disappeared, the alleged prior name right and further the merchandising rights thereon became groundless. In spite of this, the Court overturned the TRAB's decision by finding that Fujian Fengshang has no relation with Michael Jackson and its registration of the trademark will likely to mislead the public and damage the public interests.

In an infringement litigation, the courts are inclined to protect the merchandising rights from the perspective of personality rights, including the name right and portrait right when the alleged name can be connected to a real person. When it comes to a fictional character's name, the court might render protection by directly citing the merchandising rights as in the above KungFu Panda case.

On March 29, 2011, the basketball player Yao Ming filed a lawsuit to Wuhan Intermediate People's Court, against a sportswear producer - Wuhan Yunhe Dashayu Sportswear Co Ltd, for name and portrait rights infringement. Yao alleged that, without his authorization, the defendant produced and sold "Yao Ming Yidai" (Yao Ming Era in English) goods and used his name and portrait for promotion activities. Yao claimed that the behavior of the defendant infringed his name and portrait rights and constituted unfair competition and should be stopped immediately.

The court found, the defendant used the name and portrait of Yao Ming during promotion activities and connected its produced and sold sport goods with Yao Ming. By taking advantages of the social image of Yao Ming and his influence, the defendant carried out misleading advertising for its products to confuse the origins of the goods. The Court held that, this behavior violated the principle of honesty and credibility, infringed the name and portrait rights of Yao Ming and also constituted unfair competition.

In appeal, Hubei High People's Court upheld the first instance

decision, and held that, without authorization or permission, any entity or individual shall not take others name, portrait, signature or any other relevant personality mark for commercial use. Wuhan Yunhe, as a business entity, not only infringed the legitimate rights and interests of the right owner but also damaged those of the consumers, and seriously disturbed the social economic order, and shall be stopped immediately.

In Zhang Jinlai v. Linekong Entertainment Technology Co., Ltd., concerning the well-known character, the Monkey King, in the television drama the "Monkey's Story" in China, the actor Zhang Jinlai, who's well known by his stage name Liu Xiao Ling Tong, sued Linekong Entertainment for infringement of his portrait right and the right of reputation before the Xicheng District Court of Beijing. Since his claim was not supported by the Court, Zhang Jinlai appealed to the Beijing First Intermediate People's Court, which, although upheld the first instance decision, held that the personality rights can be extended onto the character in the television drama.

The appeal court opined that,

The Monkey King and Zhang Jinlai has a one to one correspondence, that is, there is an identifiability between the character and the actor. During a relatively stable time period, when certain audiences see the Monkey King played by Zhang Jinlai, they can recognize that its actor is Zhang Jinlai, and the answer is exclusive. In this case, protection of the character is within the extension of the portrait right. The laws acknowledge the commercial value of a character invested and deduced diligently by a person. When said character is used by others without consent, it not only infringes the personal dignity on the portrait right but also infringes the property interests of the right owner. When the image of a character mirrors the physical features of the actor and shows identifiability with the actor, protecting said character as a portrait of a natural person is a precondition for preventing others from infringing the commercialization of the personality rights.

In spite that the merchandising rights are essentially protectable both in the opposition/invalidation proceedings and in the legal proceedings, some critical issues stay unsolved yet, such as the nature of the merchandising rights, when it expires and what's the boundary of the rights.

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TRADEMARK INVALIDATION THROUGH ADMINISTRATIVE PROCEDURE

Author: Yuncheng Li

Siemens, a German multinational conglomerate company, is one of the world's most prominent makers of medical diagnostics equipment, including CT, MR, DR, PET/CT scanners and systems. Siemens Ltd. China, which was established in China, is a wholly owned subsidiary of Siemens.

In November 2013, Siemens Ltd. China discovered that a company had registered with the Chinese Trademark Office trademarks such as Cloud CT, Cloud PET/CT, Cloud MR, Cloud DR, Cloud MI and their equivalent in Chinese characters for goods including medical diagnostic and imaging equipment and instruments. It appeared that the registration of the said trademarks could have prevented Siemens and other competitors in the same industry from using these names in China.

Siemens Ltd. China therefore, filed an invalidation proceedings action against the registrations with the Trademark Review and Adjudication Board (TRAB).

It was found that in the industrial healthcare sector, particularly in the diagnostic and imaging sector, the initials in the registered trademarks are generic terms for:

CT = Computed tomography

PET/CT = Positron emission tomography--computed tomography

MR = Magnetic resonance (imaging)

DR = Digital radiography

MI = Molecular imaging

In addition, the word "Cloud" has in recent years become a synonym for "cloud computing", a technical term

that is used in almost every sector of industry. According to Article 11 of the Chinese Trademark Law, the following signs shall not be registered as trademarks:

1. those only comprising generic names, designs or models of the goods in respect of which the trademarks are used;

2. those having direct reference to the quality, main raw materials, function, use, weight, quantity or other features of the goods in respect of which the trademarks are used; and

3. those lacking distinctive features other than the aforesaid.

The argument was that the subject trademarks at issue are either generic names or directly descriptive, and thus these trademarks lack distinctiveness.

At the end of 2014, TRAB issued 7 decisions respectively, all in favour of Siemens Ltd. China, declaring the respective registrations to be invalid.

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CUSTOMS ACTIONS - PROCEDURES, NEW MEASURES AND CASE STUDIES

Author: Bin Zhang, Yue Zheng

With the first Regulations on Customs Protection of IP Rights promulgated in October 1995, China ascended the new height of protection of IP rights. Now the Regulations on Customs Protection of IP Rights is an important legal resource for IP owners to enforce their IP rights in China. According to the official statistics, in 2013 China customs totally detained about 19000 batches of imported or exported goods infringing upon IP rights. At present customs protection has become the most effective way to prevent the counterfeit goods from being exported out of China mainland.

As learned from customs recordation system, more than 70% of the IP rights recorded with China General Administration of Customs are trademark rights and on the experiences drawn from the cases our law firm handled on our clients' behalf, more than 99% of customs protection cases were related to trademark infringement cases, therefore, this article would only introduce trademark protection practiced by Chinese customs.

According to Regulations on Customs Protection of IP Rights, there are two patterns of customs protection, one is "Ex Officio Action", and the other is "Detention Pursuant to an

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Application". For the purpose of customs' Ex Officio Action, the trademark owner should record its registered trademark with China General Administration of Customs on the basis of each registration for each recordation. When a registered trademark has been successfully recorded with China General Administration of Customs, the information of the trademark will be uploaded to the official computer system of Chinese customs to be shared by all the local customs within China mainland. Once detecting suspected infringing goods during routine inspections on imported or exported goods, the customs will notify trademark owner or his agent of the detection. Upon confirming these goods are not legitimately manufactured, the trademark owner can file an application to customs for detaining the goods. Upon receiving the trademark owner's application, customs may detain the suspected infringing goods and then make an investigation to ascertain the infringing status of the suspected goods. If the customs determines the goods are infringing goods, the customs would confiscate the goods and then render a penalty decision against the exporter. If the customs could not determine the infringing status of the goods, the trademark owner may apply to the People's Court for adoption of the

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measures to order the cease of the infringing act or for preservation of property, meanwhile instituting legal proceedings with the People's Court, requesting the People's Court to make a judgment as to whether the goods has constituted infringement to the trademark right. Anyway no matter whether or not a trademark has been recorded with China General Administration of Customs, a trademark owner may have his trademark protected by customs, here we go to the other pattern for customs protection, namely Detention Pursuant to an Application. When detecting the suspected infringing goods in pending importation or exportation, the trademark owner shall submit an application and relevant documents of proof, and provide evidence sufficient to prove the obvious existence of the infringement facts as well. The application shall include the following main contents: the IP owner's name and his place of registration or his nationality; the IP's name, contents, and relevant information; the names of both the consignee and the consigner of the suspected infringing goods; the name and specifications of the suspected infringing goods; and the possible port and time of entry or exit of the suspected infringing goods, and the means of transportation therefor. If relevant trademark right has not been recorded with China General Administration of Customs, the trademark owner should also present a photocopy of the personal identity certificate of the trademark owner, photocopy of the industrial and commercial business license or photocopy of any other registration document and a photocopy of the trademark registration certificate issued by China Trademark Office. At the same time, the trademark owner should provide customs with sufficient evidences proving the goods requested to be detained by the customs are pending to import or export and the trademarks have been substantially used on the relevant goods without the consent of trademark owner. After the local customs detains the goods, the trademark owner should apply to the People's Court for a decision of ceasing the infringing act or property preservation within 20 working days from the official detention date of the suspected infringing goods. Otherwise the customs may release the goods. On experiences, the Detention Pursuant to an Application is not quite practical; obviously it is inconvenient to the trademark owner which explains why most of the customs cases we handled on our clients' behalf fall into Customs' Ex Officio Action category since China adopted customs protection of IP rights.

The Regulations on Customs Protection of IP Rights was amended two times in 2003 and 2010 respectively. According to the 2010 amendment, there were some new provisions implemented. The new provisions focus on the carried articles

of individuals, disposal of the infringing goods, the cancellation of recordation and the withdrawal of application for detention. Among them, the following two changes should be noticed by trademark owners: 1. where an individual brings or mails into/ out of China mainland articles exceeding the reasonable quantity for personal use and infringing upon others' trademark rights, such goods shall be treated as infringing goods. 2. where the confiscated goods infringing upon trademark rights can be used for the commonweal undertaking, the customs shall transfer them to the relevant commonweal institutions for welfare purposes; if the trademark owner has an intent of purchase, the customs may transfer the goods to the trademark owner non-gratuitously. If the confiscated goods infringing upon the trademark rights are unable to be used for the commonweal undertaking and the trademark owner has no intent of purchase, the customs may lawfully auction them after the infringement features have been eliminated; but the imported goods bearing counterfeit trademarks shall not be permitted to enter the commercial channels only by eliminating the trademarks on the goods, except for special circumstances; and if the infringement features are unable to be eliminated, the customs shall destroy such goods.

1) The IP rights which trademark owner wants to record with customs should be protected by Chinese laws. If the trademarks used on the exported goods are protected by the importing country but not China, the trademark could not be accepted for protection by Chinese customs. The IP rights that could be accepted for recordation limit to trademarks, patents and copyrights, other types of IP rights could not be accepted for recordation with customs. The application for customs recordation should be filed with the General Administration of Customs in Beijing directly, other local customs within China mainland could not accept the application for customs recordation. The party who is capable to file the customs recordation is trademark owner or his agent, the trademark licensee may not file an application of customs recordation in his own name, but the licensee may file the application for customs recordation as an agent of the trademark owner. Pending trademarks could not be accepted for recordation with customs. If a trademark is an international registration, before applying for customs recordation, the trademark owner should first apply to China Trademark Office for a certified copy of the international trademark registration proving that said registration has been extended to China. The trademark

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owner may also record a legitimate users list with customs to avoid customs' possible detention or delay of the goods declared by the authorized exporters.

2) During the procedure of Detention Pursuant to an Application, the trademark owner should deposit a guaranty equivalent to the values of the goods with the customs. In the Ex Officio Action, the required guaranty varies based on difference in the value of goods: (1) where the value of goods is below RMB20,000, the guaranty should be equivalent to the value of the goods; (2) where the valued of goods is above RMB20,000 but below RMB200,000, the guaranty should be 50% of the value of the goods, but the minimum amount of the guaranty shall not be less than RMB20,000; (3)where the value of goods is above RMB200,000, the guaranty of RMB100,000 should be provided. Furthermore, upon the approval of the customs, the trademark owner may provide a bank guaranty with the customs. The amount of the bank guaranty shall be equal to the summation of the transportation, warehousing and disposal expenses occurred for all the detention cases the trademark owner filed during the immediately previous year; but the minimum amount of such bank guaranty shall not be less than RMB200,000. Where the customs determines to confiscate the infringing goods, the guaranty could be refunded after the trademark owner makes payment of transportation, warehousing and disposal expenses directly to the corresponding responsible entities.

3) In the Ex Officio Action, the trademark owner should respond to the customs notification within 3 working days, if there is no response by the deadline, the customs may release the goods. The 3 working days is strictly required in the customs protection. Actually we could notice it is sometimes tough for a foreign trademark owner to complete the whole procedures within 3 working days including scheduling the travel to customs' checking spot, inspecting the goods, filing application, arranging payment of guaranty, etc. In addition, the agent of the trademark owner will also consume a reasonable time. However in most of the cases, there is no grace period and the required 3 working days could not be adaptive. Therefore the trademark owner should have to prepare to answer the customs notification within a short time limit. In practice, the exporter usually provides customs with evidences or written announcement claiming their products are legitimate when customs shows suspicion about the goods. In this instance, customs will send the evidences and written announcement together with the notification to trademark owner for authentication. Trademark owner may analyze the available information, evidences and photos

possibly provided by customs based on logical consequence and then make judgment as to whether these suspected goods are infringing articles or not, omitting the procedures to show up at customs' checking spot and view the goods.

CASE STUDIES

Case 1

The customs not only detects suspected infringing goods where the trademark used is same as the trademark recorded with the customs, but also detects the goods with a trademark similar to the recorded trademark. In May 2012, 170 industrial sewing machines bearing the trademark "JUKIN" were detected by Ningbo Customs. JUKI Corporation, the trademark owner of "JUKI" for sewing machines, were informed via its China agent. After spot inspection, JUKI Corporation filed detention application with Ningbo Customs. In July 2013, Ningbo Customs issued a penalty decision stating that the detained "JUKIN" sewing machines are infringing goods, the goods were confiscated and a fine was imposed.

Case 2

For a customs protection case, the IP owner has a right to file a lawsuit against the exporter with People's Court claiming damages. In November 2007, Ningbo Customs detected 100 boxes of facial creams with the trademark PALMER'S SKIN SUCCESS. The trademark owner, E.T.BROWNE DRUG CO.,INC., asked its China agent to file a detention application within time limit and Ningbo Customs made a penalty decision in 2008 including the contents of confiscating the infringing goods and imposing a fine. Although the volume and the value involved in this case are far from enormous, the trademark owner still decided to file a lawsuit claiming damages and wishing to give a lesson to the exporter or any other possible parties who might conduct an similar infringing act. The lawsuit was filed in October 2008 with Ningbo Intermediate People's Court. However, just before the date for court hearing in January 2009, a settlement in favor of trademark owner under the mediation of the judge was reached.

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NO TRADEMARK INFRINGMENT FOR PARALLEL IMPORTS IN CHINA

Author: Xiaojun Guo, Beibei Gu

In the context of trademark infringement, parallel imports involve the imports into China for resale of genuine goods, which have been legitimately manufactured and marketed abroad by the authority or with the consent of the trademark owner, without the authorization or consent of the same trademark owner or its exclusive licensee in China. Parallel imports usually happen when there is a price difference between the exporting country and China.

Recent cases show that the courts lean to no trademark infringement for parallel imports unless trademark owners can prove misrepresentation, confusion or goodwill/reputation damages.

In the trademark infringement case, Les Grand Chais de France S.A.S. v. Montewine International Trade (Tianjin) Co., ltd, made by Tianjin High People's Court on December 17, 2014, the Court, by applying the Trademark Law of 2001, upheld the first instance decision and held that Tianjin Montewine, which imported three kinds of

wines labeled "J.P.CHENET"without authorization from the plaintiff, didn't infringe upon the trademark right of Les Grands Chais.

The plaintiff and appellant, Les Grands Chais, owns the trademark right for "J.P.CHENET" both in China and France in class 33, covering wine, peppermint liqueurs, alcohol (beverage), alcohol (liqueur). On March 9, 2009, Les Grands Chais concluded an exclusive sales contract with Tianjin Dynasty Brewery Company Ltd., authorizing the later to sale their wines with the alleged trademarks in China.

On August 31, 2012, the defendant and appellee, Tianjin Montewine made declaration to Tianjin Customs for importing wines including white wines, rose wines and red wines. The labels on the bottles of the imported wines indicated neither the grape varieties nor the grade of the wines. While the labels on the bottles of the wines imported by Tianjin Dynasty Brewery from the

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plaintiff indicated the information. Tianjin Montewine proffered evidence showing that their imported wines originated from the plaintiff. The plaintiff rejected this but didn't submit any evidence.

At issue was whether Tianjin Montewine's importation into China of the three kinds of wines marked "J.P. CHENET" without the authorization of Les Grands Chais infringed upon the later's trademark right.

The Tianjin High People's Court opined that:

There is not definite provision in the Trademark Law prohibiting the above parallel imports. The Court enquired about the purposes of and the basic principles in the Trademark Law to decide whether the behavior of the defendant has constituted trademark infringement, in consideration of the facts of the case, with a view to achieving a balance among the right owner, the importers and the consumers and a balance between protection of trademark right and free circulation of goods.

The Trademark Law protects the trademark right so as to prevent confusion of the origins of goods or services, to maintain fair competition and to promote economic development, meanwhile protects the legitimate rights and interests of consumers and the public, for realizing a balance between protection of the trademark owner and protection of the consumers. In this case, the following factors shall be taken into consideration.

Firstly, whether there is a "significant difference" between the wines imported by Tianjin Montewine and the wines sold by Tianjin Dynasty Brewery, as alleged by the plaintiff.

The Court found the wines imported by Tianjin Montewine were originated from the plaintiff and sold by the plaintiff's English distributor. The defendant didn't make any change to the imported wines, including the contents, the labels and the packages. Les Grand Chais sold in China wines of different grades, covering from high-end to low-end for varieties of consumers with different demands and levels. The anticipation or dependence of consumers on "J.P.CHENET" wines would not be affected by the wines imported by the defendant. The alleged "significant difference" between the wines can not stand in terms of the grade and the quality of the wines.

Secondly, whether there is a possibility of confusion and whether the goodwill/reputation of the plaintiff was damaged.

The Court found the goodwill or reputation of the wines with the trademark "J.P.CHENET" obtained from any marketing

activity including advertising and exhibiting as well as the value added thereby extends to all series of the wines of the plaintiff instead of solely to the high-end wines. Whereas there is no significant difference between the wines imported by Tianjin Montewine and the wines sold through Tianjin Dynasty Brewery in China, and the defendant didn't change their imported wines, i.e. the elements affecting purchase-decision of consumers didn't change, the importation of the defendant neither confused the customers as to the origins of the wines nor damaged their trust in the wines, and in turn didn't damage the goodwill or reputation and interests of the plaintiff.

The Court therefore didn't support the claim of Les Grand Chais by referring to the issues of confusion and damages to its goodwill or reputation.

A similar case was made by the Shanghai Second Intermediate People's Court on April 23, 2013. In Victoria's Secret Stores Brand Management, Inc. v. Shanghai Jintian Clothing Ltd., the plaintiff, Victoria's Secret Stores Brand Management, which is the owner of the registered trademarks for "VICTORIA'S SECRET" in class 25 and "VICTORIA'S SECRET PINK" in class 35 and two registered trademarks for the Chinese characters of "VICTORIA'S SECRET" in class 25 and class 35 in China, claimed, among others, that the defendant, Shanghai Jintian Clothing used the plaintiff's trademarks for marketing and sold goods with the registered trademarks, and that said behavior infringed upon its trademark rights.

The Court found the defendant purchased the genuine goods, i.e. lingeries originated from the plaintiff's parent firm LBI through regular commercial channels, and distributed those goods to retailers by wholesales. When selling the goods, use of the registered trademarks of the plaintiff on the labels, hangers and packages as well as catalogues was a part of the sales behavior, and would not mislead the public as to the origins of the goods. Therefore, the Court held that the defendant did not infringe upon the exclusive right to use the alleged trademarks.

A latest case was brought by the exclusive licensee of four Chinese registered trademarks in class 32 of German beer manufacture, Kstritzer Schwarzbierbrauerei GmbH, against a Chinese company, made by the Beijing High People's Court on May 12, 2015, regarding the importation of KSTRITZER beer by said Chinese company without the consent of Kstritzer Schwarzbierbrauerei GmbH and its exclusive licensee in China. The Court found that the defendant imported the brand of beer from a Netherlands company,

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which made clearly indication that the beer was originated from Germany and were made by the trademark owner.

The Court rejected the claim of the plaintiff by reasoning that: 1) the defendant imported the genuine beer with the registered Chinese trademark, which correctly identified the source of the beer and would not cause confusion of origins; 2) the Trademark Law and other laws don't prohibit parallel imports of trademarked goods into China; 3) the accused goods were produced and sold by the trademark owner, the circulation of the goods would not cause damages to the goodwill or reputation of the trademark owner.

It seems that the Chinese courts are willing to apply the "exhaustion of trademark right" internationally to deny finding trademark infringement when genuine goods manufactured or marketed by trademark owners abroad are imported into China. The implication might be that the trademark owners have gained sufficient benefits from their first sales and parallel imports are essentially good to the Chinese consumers. To maintain control of the distribution of goods in China, trademark owner shall not only rely on their trademark rights in China but also rely on their contractual relationship with

This publication is designed to provide our friends and clients with up-to-date information regarding intellectual property in China. It is not intended to provide legal advice. We welcome your suggestions and comments.